Gateway Financial Holdings Reports Operating Results for the Quarter and Nine Months Ended September 30, 2003 ELIZABETH CITY, N.C., Oct. 27 /PRNewswire-FirstCall/ -- Gateway Financial Holdings, Inc. , the holding company for Gateway Bank & Trust Co. reported financial results today for the quarter and nine months ended September 30, 2003. Net income for the third quarter of 2003 totaled $330 thousand compared to $180 thousand for the third quarter of 2002, an increase of $150 thousand or 83.3%. Other significant events during the quarter include: -- Recorded its eleventh consecutive quarter of profitable operations; -- Earned $0.10 per share (diluted) for the quarter, a 67% increase over the prior year's quarter; -- Exceeded $300 million in total assets, ending the quarter at $303.0 million; -- Opened our tenth financial center on August 15, 2003 via the acquisition of the Elizabeth City-Southgate banking office of Central Carolina Bank which included $16.5 million in deposits; and -- Completed the issuance of $8.0 million trust preferred securities on August 1, 2003. Net income for the first nine months of 2003 was $764 thousand or $0.24 per share (diluted) compared to $454 thousand and $0.14 per share (diluted) for the first nine months of 2002. Earnings per share (diluted) increased 71.4% over the prior year period. Net interest income for the quarter ended September 30, 2003 totaled $2.1 million, an increase of $672 thousand or 46.1% over $1.5 million reported for the quarter ended September 30, 2002. Non-interest income for the three months ended September 30, 2003 was $1.2 million, an increase of $519 thousand or 71.5% over $726 thousand reported for the three months ended September 30, 2002. These were partially offset by a 47.1% increase in Non-interest expense. Non-interest expense for the quarter ended September 30, 2003 totaled $2.7 million, an increase of $871 thousand over $1.8 million reported for the quarter ended September 30, 2002. Net interest income for the nine months ended September 30, 2003 totaled $5.8 million, an increase of $1.9 million or 47.6% over $3.9 million reported for the nine months ended September 30, 2002. Non-interest income for the three quarters ended September 30, 2003 was $3.3 million, an increase of $1.4 million or 72.7% over $1.9 million reported for the three quarters ended September 30, 2002. These were partially offset by a 47.9% increase in Non- interest expense. Non-interest expense for the nine months ended September 30, 2003 totaled $7.5 million, an increase of $2.4 million over $5.0 million reported for the nine months ended September 30, 2002. At September 30, 2003 total assets were $303.0 million, an increase of $91.9 million or 43.5% over $211.2 million reported for September 30, 2002. Loans increased $75.4 million or 52.5% to $218.9 million at September 30, 2003 from $143.6 million at September 30, 2002. Deposits were reported at $216.1 million on September 30, 2003, up $57.9 million or 36.6% from a year earlier. Borrowings totaled $53.2 million on September 30, 2003, an increase of $24.8 million or 87.3% from September 30, 2002. At quarter-end, the bank's allowance for loan losses equaled $2.6 million or 1.18% of total loans and 205% of non-performing loans. At quarter-end, non-performing loans and non-performing assets totaled $1.3 million or 0.58% of total loans 0.42% of total assets. Stockholders' equity increased $719 thousand or 3.0% from $23.8 million reported on September 30, 2002 to $24.5 million. Stockholders' equity equaled 8.1% of total assets on September 30, 2003. Regulatory capital ratios are all well in excess of the "well-capitalized" threshold. D. Ben Berry, Chairman, President and CEO stated, "We are pleased that Gateway Financial Holdings continues to post improved financial performance while making significant investments in our franchise. Our increased net interest income is due to both growth and an improving net interest margin. Our non-interest income is benefiting from significant increases in service changes, insurance operations and mortgage banking. Non-interest expense increases are primarily a result of our continued branch expansion. We expect these "investments" to benefit earnings in future periods. Despite the costs associated with these franchise enhancements, we believe our continued expansion is the best way to build shareholder value." Gateway Financial Holdings, Inc. is the parent company of Gateway Bank & Trust Co. Gateway Bank & Trust Co. is a full-service community bank with offices in Elizabeth City, Edenton, Kitty Hawk, Plymouth and Roper, North Carolina, and in Chesapeake and Virginia Beach, Virginia. The bank also provides insurance through its Gateway Insurance Services, Inc. subsidiary and brokerage services through its Gateway Investment Services, Inc. subsidiary. Statements contained in this news release, which are not historical facts, are forward looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Commission from time to time. Such forward- looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principals, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services. Gateway Financial Holdings, Inc. Consolidated Condensed Balance Sheets (unaudited) September 30, 2003 2002 Assets (Dollars in thousands) Cash and cash equivalents: Cash and due from banks $ 8,170 $ 4,710 Interest-earning deposits with banks - 2,935 Total cash and cash equivalents 8,170 7,645 Investment securities available for sale, at fair value 50,352 45,735 Loans receivable 218,917 143,560 Allowance for loan losses 2,583 1,639 Net loans receivable 216,334 141,921 Bank premises & equipment, net 11,859 9,449 Cash surrender value life insurance 7,018 - Goodwill & Intangibles 3,672 2,274 Other assets 5,628 4,163 Total assets $303,033 $211,187 Liabilities and Shareholders' Equity Deposits: Demand deposits $ 27,869 $ 18,195 Savings, Money market & NOW 66,483 32,683 Time deposits over $100,000 37,554 41,087 Other time deposits 84,170 66,216 Total deposits 216,076 158,181 Federal Home Loan Bank Advances 41,000 28,400 Federal funds purchased 12,206 - Trust preferred securities 8,000 - Accrued interest payable and other liabilities 1,245 791 Total liabilities 278,527 187,372 Shareholders' Equity Common stock, $-0- par, 10,000,000 authorized, 3,166,965 issued and outstanding at 9/30/03 3,155,880 issued and outstanding at 9/30/02 - - Paid-in capital 24,890 24,788 Retained earnings (538) (1,475) Accumulated other comprehensive income (loss) 154 502 Total shareholders' equity 24,506 23,815 Total liabilities and shareholders' equity $303,033 $211,187 Gateway Financial Holdings, Inc. Consolidated Condensed Statement of Operations (unaudited) Nine Months Ended, September 30, 2003 2002 (Dollars in thousands, except per share data) Interest Income 9,724 7,438 Interest Expense 3,946 3,524 Net Interest Income 5,778 3,914 Provision for loan losses 900 355 Net Int Income After Provision 4,878 3,559 Service charges on deposit accounts 636 410 Insurance operations 1,113 954 Mortgage banking operations 712 242 Brokerage operations 147 157 Gain sale of securities 244 166 Other 496 11 Total noninterest Income 3,348 1,940 Personnel costs 4,055 3,006 Occupancy and equipment 1,265 676 Data processing fees 309 366 Other 1,833 997 Total noninterest expense 7,462 5,045 Income Before Income taxes 764 454 Income taxes - - Net Income 764 454 Net income per common share Basic and diluted $ 0.24 $ 0.14 Market value per share $10.95 $ 7.20 Book value per share $ 7.74 $ 7.55 Gateway Financial Holdings, Inc. Consolidated Condensed Statement of Operations (unaudited) Three Months Ended, September 30, 2003 2002 (Dollars in thousands, except per share data) Interest Income 3,499 2,708 Interest Expense 1,370 1,251 Net Interest Income 2,129 1,457 Provision for loan losses 325 155 Net Int Income After Provision 1,804 1,302 Service charges on deposit accounts 243 157 Insurance operations 408 323 Mortgage banking operations 260 104 Brokerage operations 59 37 Gain sale of securities 124 88 Other 151 17 Total noninterest Income 1,245 726 Personnel costs 1,503 1,083 Occupancy and equipment 471 255 Data processing fees 86 135 Other 659 375 Total noninterest expense 2,719 1,848 Income Before Income taxes 330 180 Income taxes - - Net Income 330 180 Net income per common share Basic and diluted $ 0.10 $ 0.06 DATASOURCE: Gateway Financial Holdings, Inc. CONTACT: D. Ben Berry, Chairman, President and CEO, or Mark A. Holmes, Senior Executive Vice President and CFO, both of Gateway Financial Holdings, +1-252-334-1511

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